Empowering China's bond market growth through high-quality credit analysis

At the recent central financial work conference held at the end of October, China outlined the future priorities and directions for its financial sector.

Among the key priorities is promoting the development of high-quality financial markets. As an indispensable component of the bond market infrastructure, credit rating agencies play an active role in assessing credit risk and riskpricing.

Gina Huang, China chair of S&P Global and CEO of S&P Global (China) Ratings, a subsidiary of S&P Global, shared her views on the development of the China bond market and the company's China journey.

In January 2019, S&P Global (China) Ratings became the first wholly foreign-owned CRA receiving approval from the People's Bank of China to operate in the Chinese domestic market.

Later in October 2020, the company completed the registration filing with the China Securities Regulatory Commission, expanding its capabilities in China through entering the exchange bond market.

S&P has operated in the Chinese domestic bond market for nearly five years. What is the key progress you've made so far?

In establishing our domestic rating business, our aim has been to serve as the bridge between the global and Chinese bond markets, and to address the growing demand for enhanced transparency and analytical rigor within the Chinese market.

Since publishing our inaugural rating in July 2019, we have issued credit ratings on corporate, financial institutions and structured finance securities, and published many thoughtful commentaries on various sectors and key themes. We've also organized over 200 virtual and in-person events and outreach activities to share our opinions, ratings and methodologies with market participants within and outside China, attracting more than 900,000 participants.

Last year, we launched a new investor service product called Private Credit Analysis that offers forward-looking insights on entities' credit and risk profiles. Our PCA reports cover nearly all public bond issuers across 40 sectors in China, adding transparency to the local market.

What are the biggest opportunities and challenges you are facing?

We have long believed that there is a genuine demand for high-quality credit analysis and globally understood insights on China's domestic bond market.

The feedback we've received from market participants, especially during times of market turbulence, has reinforced our belief.

As an international CRA with the widest remit in China, we are uniquely positioned to meet that demand and bridge the information gap facing investors, especially international investors.

Yet what we're offering is a new benchmark that is distinctive from the prevailing credit culture in China.

Communicating and educating market participants, including domestic issuers and investors, about our offerings, has been a dedicated and gradual process. Expanding our domestic ratings coverage in China to a critical mass will take time.

We are confident that, with the support of regulators in advancing the Chinese credit rating sector, we'll make steady progress toward our long-term goal of building a trusted and valued voice in China.

How can international CRAs like S&P contribute to the development of China's bond market?

As China's markets continue to open up and develop, I believe that international CRAs, such as S&P, can play a vital role in facilitating the process.

PBOC has noted in its announcement regarding our entry approval that the entry of international CRAs can help satisfy the demand of international investors looking to allocate diversified renminbi assets.

This, in turn, can promote the overall rating quality within China's credit rating industry.

These objectives have remained at the forefront of our efforts since our inception.

China's capital markets are of significance and scale, making them impossible for international investors to ignore.

The country's bond market, totaling 151.5 trillion yuan ($20.87 trillion) by the end of July, sees limited foreign participation, especially in credit bonds. Operating across both interbank and exchange bonds markets, we hope our services could empower global and local investors with essential information and facilitate informed decision-making.

This, in turn, has the potential to broaden accessibility for investors worldwide, contributing to overall growth and transparency.

How do you see the development of China's CRA sector?

In recent years, we have seen some important foundations laid by Chinese regulators to shape the future of China's CRA sector.

The guidelines they have set out align with the aim of establishing a strong and healthy CRA sector that delivers quality ratings.

However, further credit differentiation is required to be cultivated, especially as China plans to build its domestic high-yield bond market.

For our part, we remain focused on providing high-quality and differentiated ratings built on a combination of an international standard of ratings principles and our local insights. We are looking forward to working with different market participants, including regulators, to play our part in boosting the development of the CRA sector.

Can you share more about your broader China plans?

Our commitment to China is deeply rooted in a history that spans over three decades. S&P Global's engagement with China began in 1992 when we initiated interactions with Chinese issuers in the offshore bond market.

This journey, while not long in the domestic rating sector, has been a significant part of our history in China.

Over the years, S&P Global has seen China as a strategically important market, and we remain dedicated to its long-term development.

Our journey in China took another exciting turn last February with the completion of our company's merger with IHS Markit.

This expanded entity now comprises S&P Global Market Intelligence, S&P Global Ratings, S&P Global Commodity Insights, S&P Global Mobility, and S&P Dow Jones Indices.

With our increased scale and combined strengths in credit and risk management, indices spanning multiple asset classes, private markets, ESG and energy transition data and analytics, we are well equipped to offer a broader and deeper portfolio of unique solutions. Our aim is to assist customers in making well-informed and confident decisions in the dynamic Chinese market.